Arun faces options for survival after no more gas

Natural gas producer PT Arun NGL, a partly-owned subsidiary of state oil and gas producer Pertamina, is now working on options for survival as its gas production in Aceh will cease in 2014.

“Arun will stop its operation in 2014 because there will be no more gas. It will mean serious losses if we don’t manage to find a good solution for Arun,” Arun corporate secretary Suparman told The Jakarta Post in Jakarta on the late Friday.

Arun is 55 percent owned by Pertamina, 30 percent by ExxonMobil Oil Indonesia and another 15 percent by its Japanese buyers grouped in the Japan Indonesia LNG Co.

Suparman said that Arun had huge assets which were still in good condition such as one condensate plant, six liquefied natural gas (LNG) liquefaction plants and one liquefied petroleum gas (LPG) plant.

“We are now thinking about the future of Arun after Aceh does not produce any more gas. This is so urgent because we only have three years left to set everything clearly,” he said. Suparman said the government has several ideas on how to resume Arun operations after the end of gas production in the province.

“The government through Pertamina has asked Arun to do some studies on the ideas,” he said.

One idea is to convert facilities at the LNG and LPG plants to be LNG receiving terminals that will maintain gas supply for Aceh.

Another idea is to convert the facilities to be able to produce bio-fuel and other products using palm oil as its raw material.

“We are now doing some feasibility studies on these options,” he said, adding that the company aimed that the studies, which would cost US$ 125,000 of the company’s budget, would be completed by the end of this year.

Irnanda Lhaksanawan, the deputy to the state-owned enterprises minister for strategic industries and manufacturers, said that he had been notified of the plan to convert some Arun facilities to become an LNG receiving terminal by Pertamina.

“We are still waiting the final study on the option so that we will decide which option is the best for Arun,” Irnanda said.

Suparman acknowledged that it would be easier to convert the facilities in Arun to become an LNG receiving terminal as this would require less budget than constructing a new floating storage receiving terminal.

“The investment needed for a receiving terminal will be around $80 million, much lower than constructing new ones that may need up to $300 million,” he said.

Suparman said an LNG receiving terminal in Aceh will help state fertilizer company PT Pupuk Iskandar Muda and state paper producer PT Kertas Kraft Aceh to maintain their businesses.

“We can secure gas either from national gas production or overseas,” he said.

Aceh’s gas was discovered in 1971 by Mobil Oil Indonesia (which is now ExxonMobil Oil Indonesia Inc). After some studies, the government agreed to export the gas to Japan. To convert the gas, the government and some partners established Arun.

Arun’s highest production was achieved in 1994 when the company managed to export 224 cargoes or 16.2 million tons of LNG. During its operation, Arun has produced 4,208 cargoes or 236 million tons of LNG, 7.5 million tons of propane, 6.9 million tons of butane, and 776 million barrrels of condensate.

In addition to Arun, Indonesia has another LNG center at Badak in Bontang, East Kalimantan, with seven trains
producing 18.5 million tons of LNG per year.